United Fire & Cas. Co. v. Titan Contractors Serv., Inc.

• Citation: 751 F.3d 880
• Decision Date: 13 May 2014
• Docket Number: No. 13–1307.,13–1307.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Parties: UNITED FIRE & CASUALTY COMPANY, Plaintiff–Appellant v. TITAN CONTRACTORS SERVICE, INC., Defendant–Appellee.

751 F.3d 880

UNITED FIRE & CASUALTY COMPANY, Plaintiff–Appellant

v.TITAN CONTRACTORS SERVICE, INC., Defendant–Appellee.

No. 13–1307.

United States Court of Appeals,

Eighth Circuit.

Submitted: Jan. 14, 2014.

Filed: May 13, 2014.

Mary Adina Johnson, argued, (David Karl Simkins, on the brief), Saint Louis, MO, for appellant.

Cynthia Juedemann, argued, (Russell F. Watters, on the brief), Saint Louis, MO, for appellee.

Before GRUENDER, BRIGHT, and MELLOY, Circuit Judges.

GRUENDER, Circuit Judge.

United Fire and Casualty Company (“United”) brought this declaratory judgment action against Titan Contractors Services, Inc. (“Titan”), and Titan counterclaimed for declaratory relief. United appeals the district court's grant of summary judgment in favor of Titan on United's claim and Titan's counterclaim, as well as the district court's denial of United's motion for summary judgment. For the reasons discussed below, we vacate and remand.

I. Background

Titan provides construction-cleanup services, including cleaning and sealing concrete floors. At all relevant times, Titan was insured under a commercial general liability insurance policy provided by United. The policy excluded from coverage “ ‘[b]odily injury’ or ‘property damage’ which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants' at any time.” The policy defines “pollutant” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” This provision, typically denominated the “absolute pollution exclusion,” appears in many commercial general liability insurance policies. See William P. Shelley & Richard C. Mason, Application of the Absolute Pollution Exclusion to Toxic Tort Claims: Will Courts Choose Policy Construction or Deconstruction?, 33 Tort & Ins. L.J. 749, 752–53 & n.13 (1998).

In March 2009, three women brought negligence claims against Titan in Illinois state court. They alleged that on April 20, 2007, Titan applied TIAH, an acrylic concrete sealant, to the floor in a portion of the office park in which they worked. Because Titan failed to ventilate its worksite properly, the TIAH infiltrated the women's office. They were exposed to TIAH and developed significant physical ailments, including acute chemically-induced asthma and vocal cord dysfunction.

Titan gave notice and tendered defense of the lawsuit to United pursuant to the policy. United commenced defense of Titan against the negligence claims subject to a reservation of rights. United then filed this action seeking a declaration that it did not owe a duty to defend or indemnify Titan against the pending state-court lawsuit because the policy's absolute pollution exclusion barred coverage for the claims raised in the lawsuit. United also sought recovery of the costs it had expended thus far defending the state-court lawsuit. Titan counterclaimed, seeking a declaration that United owes duties to defend and indemnify it against the state-court lawsuit. The parties filed cross-motions for summary judgment. The district court granted Titan's motion and denied United's, entering a judgment declaring that United owes a duty to defend and indemnify Titan against the state-court lawsuit. The district court reasoned that TIAH did not constitute a “pollutant” and, thus, that the absolute pollution exclusion did not apply to exclude coverage for the claims raised in the state-court lawsuit. United timely appealed both the grant of summary judgment in favor of Titan and the denial of its own motion for summary judgment.

II. Discussion

We review both the district court's grant of summary judgment and its interpretation of the insurance policy de novo. Bethel v. Darwin Select Ins. Co., 735 F.3d 1035, 1038 (8th Cir.2013). Summary judgment is proper only if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The parties agree that Missouri substantive law governs this diversity action. As such, “we are bound by the decisions of the Supreme Court of Missouri. If the Supreme Court of Missouri has not addressed an issue, we must predict how the court would rule, and we follow decisions from the intermediate state courts when they are the best evidence of Missouri law.” Dannix Painting, LLC v. Sherwin–Williams Co., 732 F.3d 902, 905 (8th Cir.2013) (quoting Kingman v. Dillard's Inc., 643 F.3d 607, 615 (8th Cir.2011)).

Under Missouri law, an insurer owes a duty to defend its insured whenever the complaint in the underlying lawsuit “alleges facts that give rise to a claim potentially within the policy's coverage.” McCormack Baron Mgmt. Servs., Inc. v. Am. Guar. & Liab. Ins. Co., 989 S.W.2d 168, 170 (Mo. banc 1999). “The duty to defend is determined by comparing the language of the insurance policy with the allegations in the [underlying] complaint.” Id. The parties agree that the claims raised in the state-court lawsuit fall within the general inclusionary terms of the policy. So here, United owes Titan a duty to defend so long as those claims potentially fall outside the scope of the absolute pollution exclusion. Because an insurer's duty to defend is broader than its duty to indemnify, id., if United owes no duty to defend, it likewise owes no duty to indemnify, Trainwreck West Inc. v. Burlington Ins. Co., 235 S.W.3d 33, 44 (Mo.Ct.App.2007).

The interpretation of an insurance policy is a question of law. Schmitz v. Great Am. Assurance Co., 337 S.W.3d 700, 705 (Mo. banc 2011). If the policy language is unambiguous, “the contract will be enforced as written.” Rice v. Shelter Mut. Ins. Co., 301 S.W.3d 43, 47 (Mo. banc 2009) (quotation omitted). But if the policy language is ambiguous, it will be construed against the insurer. Id. “An ambiguity exists when there is duplicity, indistinctness, or uncertainty in the meaningof the language in the policy. Language is ambiguous if it is reasonably open to different constructions.” Jones v. Mid–Century Ins. Co., 287 S.W.3d 687, 690 (Mo. banc 2009) (quotation omitted). When interpreting insurance policies, Missouri courts “appl[y] the meaning [that] would be attached [to the policy] by an ordinary person of average understanding if purchasing insurance.” Burns v. Smith, 303 S.W.3d 505, 509 (Mo. banc 2010) (quotation omitted).

This case turns, then, on whether an ordinary person of average understanding purchasing the policy would consider TIAH to fall unambiguously within the policy's definition of “pollutant.” We conclude that she would. The policy defines “pollutant” to include an “irritant,” but it does not define the latter term. When a term “is not defined in the policy, ... it is necessary to use the ordinary meaning of the word, as set forth in the dictionary.” Schmitz, 337 S.W.3d at 708;see also Burns, 303 S.W.3d at 512 n. 5 (“This Court looked to the dictionary definition ... to determine what the ordinary layperson would interpret as the meaning of that word.”). An irritant is “something that irritates,” that is, that “produce[s] irritation.” Webster's Third New International Dictionary 1197 (2002). There can be little doubt that TIAH falls within that definition. TIAH's material safety data sheet ¹ warns that the substance “may produce irritation to the nose, throat, respiratory tract, and other mucous membranes”; may be “irritating” to the eyes and skin; is “toxic”; and can cause serious injury, including “permanent brain and nervous system damage.” Similarly, promotional materials from TIAH's manufacturer caution that TIAH can “cause irritation of the eyes and/or skin” and that TIAH vapors might “result in transient central nervous system depression.” This evidence shows clearly that TIAH produces irritation. An ordinary insurance purchaser would conclude from this that TIAH constitutes an irritant and, in turn, a pollutant under the absolute pollution exclusion. That conclusion is buttressed by the fact that the federal Clean Air Act classifies xylene, one of TIAH's constituent chemicals, as a “pollutant.” See42 U.S.C. § 7412(b)(1). While perhaps not dispositive, federal statutory classification of a substance as a pollutant can put an insurance purchaser on notice that the substance might trigger the absolute pollution exclusion. See Porterfield v. Audubon Indem. Co., 856 So.2d 789, 805 (Ala.2002); Quadrant Corp. v. Am. States Ins. Co., 154 Wash.2d 165, 110 P.3d 733, 741–42 (2005). Thus, TIAH unambiguously constitutes a pollutant under the absolute pollution exclusion.

Titan does not seriously contest the foregoing analysis but instead contends that such strict fidelity to the policy's text conflicts with the Missouri Court of Appeals's decision in Hocker Oil Co. v. Barker–Phillips–Jackson, Inc., 997 S.W.2d 510 (Mo.Ct.App.1999). In Hocker Oil, 2,000 gallons of gasoline leaked from the insured's gas station onto adjacent property. Id. at 512. The court found it to be ambiguous whether gasoline constituted a pollutant under the insurance policy's pollution exclusion and thus construed the provision against the insurer. Id. at 518. The insurer had issued the policy through its “Gasoline Department,” id. at 515, and the insured's business consisted entirely of operating gas stations, id. at 514. The court observed that “it would be an oddity for an insurance company to sell a liability policy to a gas station that would specifically exclude that insured's major source of liability.” Id. at 518. As such, the insured reasonably could have concluded that gasoline was a “product it sells” rather than a pollutant. Id. Titan seeks to analogize this case to Hocker Oil, claiming that TIAH is a “product it sells” and thus that it reasonably could conclude that TIAH is not a pollutant.

We reject Titan's reliance on Hocker Oil for two reasons. First, we doubt that the Supreme Court of Missouri would...